Obama and Perdue: Tax-and-spenders of a feather flock together

Patrick Gleason Director of State Affairs, Americans for Tax Reform
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On Monday, President Barack Obama went to Durham, North Carolina-based Cree, Inc., to do what he does best — give a speech. The president began his remarks, which focused on the importance of job creation and economic growth, by touting the fact that his host was a “small business that a group of N.C. State engineering students founded almost 25 years ago” and “is now a global company.”

Indeed, small businesses are the engine of economic growth, creating 64% of American jobs. Yet, the president’s rhetoric doesn’t match his policy proposals. In fact, the budgets released by President Obama earlier this year — both his initial budget proposal and the re-do that the Paul Ryan budget shamed him into taking another stab at — entail a massive tax increase on the bulk of small business job-creating capacity.

What most Democrats don’t seem to understand, or at least won’t admit, when they talk about soaking the rich with an income tax increase on high earners, is that they would also be raising taxes on small businesses. That’s because the individual income tax system is the one in which small business profits face taxation. In fact, under Obama’s budget proposal, the top marginal rate at which most small business profits are taxed would increase 13%, from a rate of 35% to 39.6%, yielding a $709 billion tax increase on individuals and small businesses over the next ten years.

Job creators in North Carolina — the state in which Obama chose to laud small businesses this week — would be hit particularly hard by Obama’s budget proposal.

According to IRS data, of the 4.2 million individual income tax returns filed in North Carolina in 2008 (the most recent year for which data is available), nearly 660,000 of them were small businesses, and that’s just sole proprietors. Including the share of small businesses made up of S-Corps and partnerships, upwards of 825,000 small businesses file under the individual income tax system in North Carolina and would be adversely impacted by President Obama’s budget.

Unfortunately for small businesses in the Tar Heel State, along with the hanging guillotine of higher taxes proposed by the White House, North Carolina Governor Beverly Perdue has already hamstrung and taken her pound of flesh from employers, signing into law over a $1 billion in higher annual taxes, hitting small businesses with an individual income tax hike and the rest of the business community with an increase in the corporate rate.

Not only has Gov. Perdue taken Obama’s fiscal policies to the state level, she is playing defense on what many believe is the most economically disastrous policy to come out of Washington in the past two years — Obamacare.

Earlier this year the Republican-controlled North Carolina General Assembly passed Senate Bill 2, The Freedom of Health Care Protection Act, which sought to exempt North Carolinians from the new and unprecedented federal mandate that they buy health insurance.

Seeming to understand that Obamacare, and the $500 billion of new and higher taxes it imposes, was not popular in her state and would be detrimental to economic growth, Perdue initially said she would let SB 2 become law. Yet after a visit to the White House to receive her marching orders, Perdue changed her mind and vetoed HB 2, claiming that a state measure to block Obamacare “is contradictory to the federal constitution.”

Perdue’s reference to the Constitution is funny, given that the majority of the states have issued a legal challenge against Obamacare on the grounds that it violates the Constitution. Rather than let the courts decide, Governor Perdue has prematurely sided with the White House legal team and is running their North Carolina ground game.

Perdue — widely considered the most vulnerable Democratic governor in the country — has not endeared herself to North Carolinians by taking her cues from Washington. A poll conducted by the Raleigh-based Civitas Institute found 60% of North Carolinians who supported HB 2 are now less likely to vote for Perdue when she is up for reelection next year and former Charlotte Mayor Pat McCrory, her likely opponent, continues to lead her in the polls.

By serving as a lap dog to the Obama administration, Governor Perdue has coldly entrapped thousands of North Carolina families into a health care system that neither they nor their government can afford. As a result, families will have to choose between health insurance and basic necessities such as food and shelter.

There’s not much daylight between the Perdue and Obama administrations’ policy agendas.

Patrick Gleason is Director of State Affairs at Americans for Tax Reform.